EVER BRIGHT (H.K.) CONSTRUCTION ENGINEERING LTD v. KOSASIH MUANTO

DCCJ 1402/2010

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 1402 OF 2010

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BETWEEN

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DECISION

Background

1.  The Plaintiff's claim against the Defendant in these proceedings is for recovery of a sum of $112,000. The Defendant ("Vendor") is the registered owner of the property at Unit 10, 20th floor, Block C of Wah Tat Industrial Center in Kwai Chung ("Property"). On 16 November 2009,an Agreement was entered into between the Vendor and the Plaintiff ("Purchaser"), for the Vendor's sale of the Property to the Purchaser at the purchase price of $1,120,000. It is not disputed that the Purchaser paid a total deposit of $112,000 ("Deposit") under the Agreement and the earlier provisional agreement for the sale and purchase. Under the Agreement, completion of the sale and purchase of the Property was scheduled to take place on or before 31 December 2009. Time was expressed to be of the essence. There is no dispute that completion did not take place on 31 December 2009, as the Vendor was unable to deliver the title deeds to the Property before the scheduled date for completion.

2.  On 31 December 2009, the Purchaser's solicitors issued a letter to the Vendor's solicitors, referring to the fact that the scheduled time for completion had passed, that the Vendor was unable to prove and give good title to the Property before completion and had failed to complete, which constituted a repudiatory breach of the Agreement. Demand was made on behalf of the Purchaser for the return of the Deposit paid.

3.  The Vendor claims in the Amended Defence and Counterclaim filed in these proceedings that after the scheduled date for completion of the sale and purchase, the parties had agreed to extend the time for sale and purchase of the Property. He claims that the title deeds to the Property were sent by his solicitors to the Purchaser's solicitors on 5 January 2010, with a request for extension of the time for completion to 29 January 2010. The Vendor claims that the Purchaser had, through the estate agent Miss Tam, agreed to such extension. It is further claimed by the Vendor that on 8 February 2010, the parties had again agreed to extend the date for completion of the sale and purchase to 8 March 2010, which was (on a subsequent day in late February 2010) further extended by agreement to 22 March 2010. The Vendor claims that it was the Purchaser which was in breach of the Agreement in failing to complete the purchase.

4.  The Purchaser denies that there was any agreement to extend the time for completion of the sale and purchase under the Agreement.

5.  On 8 November 2010, summary judgment was entered by Master Clement Lee against the Vendor for payment of the sum of $112,000 sought, damages to be assessed, and for the Vendor's Counterclaim for damages in respect of the Purchaser's alleged breach to be dismissed. The Vendor appeals against the orders made by the learned Master.

Legal principles for Order 14

6.  The principles applicable to applications for summary judgment are clear.  To resist an Order 14 application, the defendant must show that there are triable issues.  A concise statement of the standard approach in an application for summary judgment is to be found in the dicta of Ma J, as he then was, in Schindler Lifts (Hong Kong) Ltd. v. Ocean Joy Investments Ltd. [2003] 1 HKC 438.  The court has to determine two questions: firstly, whether what the defendant says is believable as opposed to whether its version of events is to be believed; and secondly, if it is, whether what the defendant says amounts to an arguable defence in law. In determining the first question, the court should not embark on a mini trial of the action on affidavit evidence.  The burden of proof is not a heavy one.  It is not the function of the court at this stage to assess if a defence will succeed at trial.  Insofar as the second question is concerned, summary judgment will not be granted if there are arguable defences or serious disputes of law. Further, it is for the defendant to condescend on the particulars of the defences raised.

Whether there are triable issues

7.  Counsel for the Purchaser argued that due to the lack of particulars and to the existence of contradictory correspondence emanating from the Vendor's solicitors between 11 February and 8 March 2010, the Vendor's assertions of a binding agreement having been made to postpone and extend the date for completion of the sale and purchase are unbelievable, such that no arguable defence has been shown.

8.  I accept the arguments made on behalf of the Vendor that the letter of 31 December 2009 ("Letter"), which is relied upon by the Purchaser as the Purchaser's notice of acceptance of the Vendor's repudiation, raises an arguable issue as to whether the Vendor's repudiatory breach in failing to complete the sale and purchase on 31 December 2009 had in fact been accepted by and on behalf of the Purchaser.

9.  As Counsel for the Vendor has pointed out, despite the fact that the Letter records the Vendor's repudiatory breach of the conditions of the Agreement, the Letter expressly sought the return of the Deposit and stated that the demand was without prejudice to the Purchaser's right to bring action to seek "specific performance of the Agreement either in lieu of and in addition to damages" sustained by the Purchaser as a result of the Vendor's failure to complete.

10.  It is trite law that in the event of a party's breach of contract, the innocent party can either treat the party's breach as having repudiated the contract, accept the repudiation, and claim damages for breach, or seek from the court an order for specific performance with damages. The acceptance of the breach of contract must be complete and unequivocal. It is a question of fact in each case whether the option to determine the contract as a result of the breach of a party has been exercised.

11.  On the face of the Letter, it is to say the least equivocal whether the Purchaser is electing to treat the Agreement as having been discharged as a result of the Vendor's failure to complete on 31 December 2009, or to affirm the Agreement by virtue of its reference to proceedings to seek a decree for specific performance.

12.  If the Purchaser had affirmed the Agreement by its insistence on specific performance, it cannot be disputed from the correspondence emanating from the Vendor's solicitors from 5 January 2010 to 5 February 2010 at least that the Vendor was willing and prepared still to proceed with the sale of the Property after 31 December 2009.

13.  Counsel for the Vendor relies on the statement of the Court in Safehaven Investments Inc. v. Springbok Ltd. (1996) 71 P. & C.R. 59, 68 to submit that if, after an innocent party elects to affirm the contract, the repudiating party's conduct suggests that he proposes to perform the contract after all, then that party's previous repudiation is spent and has no further legal significance.

14.  Mr. Law of the Purchaser denies that there was any binding agreement reached after 31 December 2010 for extension of the time for the completion of the sale and purchase. However, the evidence shows that the Vendor's solicitors had written to the Purchaser's solicitors on 5 January 2010 to propose that completion of the sale and purchase be postponed to 29 January 2010, and that they had on 21 January 2010 sent the title deeds to the Purchaser's solicitors, who had retained the deeds. The evidence also shows that in early February 2010, Mr. Law had continued to negotiate with the Vendor through Miss Tam as to the conditions for the purchase of the Property, and according to the affirmation of Mr. Cheung filed on behalf of the Purchaser, Mr. Cheung was asked by Mr. Law in February 2010 to assist the Purchaser to seek a mortgage loan, and Mr. Cheung met with the Vendor and Miss Tam in early February 2010, and had also approached financial institutions for a mortgage loan on the Purchaser's behalf.

15.  On the totality of the evidence filed at this stage, I am satisfied that there is a triable issue as to whether the Purchaser had accepted the Vendor's breach of the Agreement, or had affirmed the Agreement, and if there was an affirmation of the Agreement, that there is credible evidence of ongoing negotiations after 31 December 2009. What caused the eventual failure of the parties to complete the transaction in February or March 2010, and which party was at breach, will have to be properly pleaded and then dealt with fully at trial.

16.  I will accordingly set aside the orders made by the Master on 8 November 2010, and grant unconditional leave to the Vendor to defend. The parties should comply with Order 25 rule 1 within 21 days after the handing down of this Decision to seek further directions for the management of the case.

17.  I will make an order nisi that the costs of the Order 14 Summons be in the cause, save that the Purchaser is to pay to the Vendor the costs of the present appeal, with certificate for Counsel, to be taxed if not agreed.